AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
After Donald Trump was elected President of the United States, capital flowed into the stock and cryptocurrency markets, causing gold prices to decline and retest the support level of $2600 per ounce. The upward trend of record-high gold prices this year seems to be coming to an end.
Following the election results, the U.S. dollar appreciated significantly, and with a reduction in global safe-haven demand, the price of gold, a safe-haven asset, has come under pressure.
For gold bulls, the real test of their faith is not when prices are rising, but during pullbacks.
However, there are reasons to remain optimistic.
Analysts from the World Gold Council recently stated that although the global economy still faces multiple adverse factors, they believe the pullback in gold prices is healthy and temporary. According to their Gold Return Attribution Model (GRAM), the drivers of the gold decline include a stronger dollar, outflows from gold ETFs, and a decrease in net long positions on Comex.
To support their view, analysts noted that the influence of U.S. yields and the dollar on gold has been weakening recently. Throughout 2024, and especially in October, most of the returns on gold have occurred during Asian trading hours. Some gold demand may be related to sanctions, but central bank gold purchases slowed in the third quarter, likely indicating that investors led the demand.
The conclusion is that the negative reactions of gold to the U.S. election results and the continued rise in U.S. bond yields and the dollar are short-term phenomena. The booming stock and cryptocurrency markets obscure the fundamental bullish logic for gold: rising global protectionism, ongoing conflicts showing no signs of de-escalation, severe overvaluation and concentration in U.S. stocks, cryptocurrency’s inability to replace gold, and Western gold investors (excluding futures markets) not significantly increasing gold holdings this year indicate a lack of bearish pressure.
Mike McGlone, a senior commodity strategist at Bloomberg Intelligence, noted that gold and U.S. stocks have risen in tandem over the past three years, but this trend is likely to change soon. The market capitalization of U.S. stocks has risen to roughly twice the U.S. GDP, near a 100-year high, which could boost gold. Since 2021, the S&P 500 Total Return Index/gold ratio has been locked in a narrow range, ripe for a breakout.
McGlone suggests that the U.S. power transition may prompt profit-taking in gold, but the long-term outlook remains bullish due to the Republican and Trump administration’s substantial victory.
Darin Newsom, a senior market analyst at Barchart.com, expressed a similar view.
He believes that although ETF and Comex data show recent weaknesses in gold, this trend will likely reverse soon. Furthermore, Trump’s policy proposals, including a weak dollar and extremely low interest rates, mean the dollar may struggle to maintain its recent strong performance. Meanwhile, tariffs, immigration policies, and tax cuts are likely to drive inflation up again, while high deficits continue to pressure U.S. Treasury’s creditworthiness.
